A company established by young aspiring entrepreneurs is now taking centre-stage in the country’s electrification drive.
--BY MADAN LAMICHHANE
Nepal Ekarat Engineering Company (NEEK) is a name which has become synonymous with the manufacturing of quality electrical transformers for the past 25 years. After receiving its license in 1991, NEEK officially commenced the commercial production of transformers from 1992. Established with an initial investment of around Rs 40 million, the company stepped into the electrical equipments market by manufacturing the 315 KVA transformer. Today it produces transformers for 1KVA-10,000 KVA and 1KV-132 KV voltage systems.
The history of NEEK is something that should make every Nepali proud. According to the company’s Managing Director Kush Kumar Joshi, NEEK has exported electrical equipment to different countries even at a time when there was almost zero technological equipment production in Nepal. “This can be an example for every company in Nepal,” he says, adding, “It is due to the company’s motto in maintaining the quality of products that we have not received any complaint from our consumers over the last two and half decades. We have always strived for ‘quality’ and this has helped us to satisfy our customers.”
Joshi shares that NEEK now has plans to focus on corporate social responsibility (CSR) to strengthen the company’s proud history.
NEEK is a joint venture which was initiated by some young Nepali entrepreneurs and Ekarat Engineering Public Co Ltd of Thailand in 1991. Before starting the production of transformers in Nepal, a team of two young aspiring entrepreneurs Kush Kumar Joshi and Ajay Kumar Mudbhari used to import transformers from the same Thai company. Observing the possibility of domestic production of transformers, the two young entrepreneurs incorporated Prakash Kumar Shrestha and Ashok Shrestha to form and register a group which would go on to be called NEEK.
At the time, electrification in Nepal was only at 11 percent. The immense potential for electrification in the country led Joshi and his team to embark on the journey to manufacture transformers partnering with the Thai company.
NEEK’s annual production capacity stands at 6,000 transformers. Currently, the company has been manufacturing around 2,000 units of transformers on a yearly basis and imports the required raw materials from countries including Japan, Switzerland, Turkey, Malaysia and India. NEEK transformers began to compete with products of international companies after the company started manufacturing Amorphous metal transformers that use American technology from 1998. The company’s plant has the capacity to produce 500 units of 100 KVA transformers on a monthly basis. Apart from manufacturing transformers, the company also produces stabilizers that maintain voltage when power is supplied to any electrical equipment.
Production of Power Transformers Begins
At one point, NEEK which used to only manufacture distribution transformers had the capacity to produce voltage system of up to 33 KV. Now the company has started to manufacture power transformers that are used in hydropower plants.
According to Joshi, a high level of technical expertise is required for the production of 132 KV transformers. “The company has the capacity to produce such transformers on the basis of our experience gained throughout the years,” he says. A 10 MVA power transformer weighs between 25 to 30 tonnes. He states that NEEK started the production of power transformers in Nepal in light of the huge possibilities in the country’s hydropower sector. “We can supply 10MVA transformers to hydropower projects that are being imported from other countries,” he mentions. He adds that NEEK can effectively cover all operational aspects such as warranties and after sales service to customers. “Given these factors, I think hydropower projects should buy transformers manufactured by a domestic producer,” he says.
Promoting Domestic Transformers
Joshi says that domestic producers like NEEK will only be able to utilise their full production capacity when the government prioritises the use of Nepali products. According to him, the public procurement process must be improved. “The non-implementation of procurement of Nepali products by public agencies as mandated in the procurement related rules and regulations have been among the factors to hinder the use of domestically produced transformers,” he says.
Apart from this, Joshi views that the government needs to provide equal treatment to increase the competitiveness of Nepali transformers. “Hydropower projects are required to pay just one percent in customs duty on imports of power transformers. Such imported transformers also receive VAT exemption. Providing similar incentives to Nepali manufacturers is imperative to make the domestic products competitive,” he stresses.
Manufacturing power transformers requires technical excellence and companies that have the necessary infrastructure which includes well-equipped facilities for research, production and testing along with skilled human resources. “This is why technological costs associated with producing power transformers are much higher than other transformers,” shares Joshi. He also says the government should lower the customs duty on the import of raw materials so as to increase the competitiveness of Nepali transformers. “Value addition will only be achieved when the import duty of raw materials is lower than the finished goods,” he says.
Plans to Expand Export
NEEK officially started exporting equipments by supplying transformers to Bhutan in 2004. The company has now already exported more than 3,000 units of transformers to Bhutan. It also exported transformers to India in the past, but could not continue the regular supply of the products.
Despite all the challenges, the company has planned to expand export to different countries. “The demand of our quality products has increased in different countries of the world. So we have plans to expand our export markets,” informs Joshi. “We are seeing a rising demand for NEEK products from various countries in the Gulf region, African nations, Bangladesh and Qatar. The company will soon start exporting equipment to these markets,” he says.
Establishing Service Centres
In order to provide quality and easy service to customers, and to make export easier, the company is planning to open two service centres at Biratnagar and Nepalgunj. Joshi says that customers will receive high quality after sales service from the outlets. Furthermore, the company plans to establish service points at seven provinces each in the future.
Excluding the transformers imported by the Nepal Electricity Authority (NEA), NEEK has supplied almost 70 percent of the transformers in the country. Most of the Nepali corporate houses and industries have been using transformers produced by NEEK. The market share of NEEK equipments started to grow gradually after the company started using American technology to produce Amorphous metal transformers in 1998. Joshi is quite confident that NEEK transformers can compete with any company when it comes to quality.
NEEK in CSR
Joshi, who believes in following responsible business practices, stresses on the fact that if every entrepreneur acts responsibly in terms of providing services to their customers as well as contributing to the society, it will surely help in the development of the nation. NEEK has been organising several youth and community focused programmes as a part of its corporate social responsibility (CSR) initiatives. A volleyball tournament which the company organises for employees of different industries that are based in Makwanpur every year is a perfect example of maintaining industrial relations in this regard. The company distributes different prizes to the winners of the tournament on its anniversary. The tournament is titled ‘NEEK Trophy’ and the company is planning to organise sports tournaments at the national level. Likewise NEEK has also constructed a bus stand and a temple in Hetauda.
Meanwhile, the company provided financial support amounting to Rs 500,000 to a micro-hydro project in Dhading district. Joshi says that the company helped the project believing that there should be electrification in every nook and corner of the country. Around 200 families from the area’s Chepang community have benefitted from the micro hydro project.
Apart from this, NEEK has also begun to build a Martyrs Memorial Park at Hetauda by joining hands with the Hetauda Sub-Metropolitan authority. Similarly, the company is also assisting in the construction of bus stands and schools in different parts of the country. NEEK has also supported a micro-hydro project in Sankhuwasabha operated by a school. On the occasion of its silver jubilee NEEK has signed an MoU with the Institute of Engineering, Pulchowk to start a Transformer course in the fourth year and scholarships for four students who will be studying ‘Transformers’ as their major subject. Joshi says that we need to improve R&D in transformers where both academia and industry should work together to enhance our technology and improve productivity.
Contribution of Staff
Joshi says the success of the company is also down to the honesty and hard work of its staff. “Our employees have been working sincerely to achieve the organisational goals. They work for the company as if it is their own home. The history of our company also doesn’t have any negative impression about our employees,” Joshi says. The staffers say that the company has been able to be one of the best in the country due to the hard work and dedication of Joshi.
NEEK has been providing employment to a large number of people. A total of 150 people are working at its production plant in Hetauda. Likewise, 25 people are employed in its corporate office at Thapathali, Kathmandu. Meanwhile, a significant number of people are also getting indirect employment from distribution and sales. All staff at NEEK are Nepali citizens including the technicians. “It clearly shows that Nepalis are also capable enough to work in a complicated technology like transformers. By looking at our staff, one needs no explanation that Nepalis are also blessed with technical know-how and can work under any circumstances,” opines Joshi. It was only at the beginning when NEEK’s employees were trained by technicians from Thailand. The staff who received training at the time now provide training and help groom the new employees of the company.
• Company’s ability to maintain quality and standard of the products and brand image since the start.
• Delay in expansion and product diversification.
• Increase in the rate of electrification in the country. Expansion of market of different transformer segments.
• Competing with large foreign companies in the government procurement process. Cost-cutting approach of foreign companies hampers business.